Public Bill Committee

[JanetAnderson in the Chair]

Further written evidence to be reported to the House

PE 21 Pensions Action Group
PE 22 Dave Baker
PE 23 Which?
PE 23A Which?
PE 23B Which?
PE 23C Which?

Clause 42

Disclosure of information by Revenue and Customs

Question proposed, That the clause stand part of the Bill.

Janet Anderson: With this it will be convenient to discuss Government new clause 14—Disclosure of tax information etc.

Mike O'Brien: I welcome you, Mrs. Anderson, and all members of the Committee back to our consideration of the Bill.
I will urge that clause 42 does not stand part of the Bill on the basis that we intend to replace it with new clause 14. Clause 42 allows Her Majesty’s Revenue and Customs to share information with the Pensions Regulator to enable the regulator to perform its compliance activities. That data sharing is crucial in making sure that employers comply with the new duties created in the Bill. It is vital that the Pensions Regulator is aware of all employers who should register and how to contact them, if required. HMRC is the best source of this information because of its pay-as-you-earn activities. Clause 42 also allows HMRC to share information about non-compliance that it has collected through tax and minimum wage activities. This will help the Pensions Regulator to identify which employers are more likely not to comply with their duties.
However, the Government recognise that clause 42 has room for even tighter safeguards. In particular, under the clause, it would be possible for the regulator, or its agents or contractors, to disclose onwardly information received by them from HMRC without being in breach of the law. We have therefore tabled new clause 14 to replace clause 42 and address its deficiencies.
New clause 14 would make it even clearer that while the Pensions Regulator can make full use of transferred HMRC data for its internal functions, the onward disclosure of that data by the regulator would be prohibited in all but a defined set of five specified circumstances: first, when HMRC’s authorisation for onward disclosure has been obtained; secondly, when the data are needed for any criminal proceedings; thirdly, when the regulator is involved in proceedings, including civil proceedings, under its existing and new powers; fourthly, when the disclosure enables or assists the Pensions Regulator to carry out its functions; and, fifthly, when the data have been anonymised.
New clause 14 would also streamline legislation providing for data sharing between the two bodies. HMRC already shares information with the Pensions Regulator to assist with the regulator’s existing functions. However, a single gateway for data flow from HMRC to the Pensions Regulator would be both more transparent and more elegant than adding multiple patches to the old gateway set out in the Pensions Act 2004. New clause 14 would replace the existing gateway between HMRC and the regulator with one that would allow the flow of data for the regulator’s old and new functions. There would thus not be the difficulty of having information flowing from HMRC to the regulator through one of two separate gateways—there will be just one.
Furthermore, the new combined gateway will improve the regulator’s ability to carry out its existing functions, making clearer the ways in which it can and cannot onwardly disclose data received from HMRC. I am sure we will have a little fun on data—no doubt we can look forward to that—but the new clause is the result of our looking very carefully at the wording of the old clause 42 and taking a view that we could tighten it up to ensure that things were clearer. I hope that the Committee will be able to support the removal of clause 42 and, in due course, the insertion of new clause 14.

Andrew Selous: May I also welcome you back to the Chair, Mrs. Anderson?
Conservative Members called for proper sharing of information between the regulator and HMRC in earlier debates because we wanted it to be as easy as possible for employers to provide the required information to the authorities. We thus completely support the principle of new clause 14 and understand the reasons why the Minister wants to delete existing clause 42. He is right, however, that I will ask him about security, in particular with regard to data-sharing. Will there be secure transmission? Will the data be encrypted when they are passed from one organisation to another? This is extremely personal and private information about how much people have paid, how long they have worked somewhere, when they started, their home address, and so on. In the light of recent events, we seek as much reassurance as possible from the Minister.

Nigel Waterson: I am following my hon. Friend’s argument intently. Did he see, as I did the other day, that the Ministry of Defence is apparently banning its staff from removing laptops from the building? That defeats the object of having a laptop, to an extent, but does he think that there should be a similar rule for these data?

Andrew Selous: My hon. Friend is absolutely right that laptops are extremely vulnerable. They can be left on trains and they can be stolen from cars, which has happened quite a lot recently. That is exactly the sort of practical detail relating to the passing on of these data on which it would be good to have reassurance from the Minister. The data would include the pay details of up to 7 million of our fellow citizens. Were something to go wrong, it would be on the scale of the child benefit data loss earlier in the year. The Committee is owed a full and detailed explanation of how the security will be planned, so I look forward to the Minister’s response.

Danny Alexander: It is a pleasure to welcome you back to the Chair and to serve under your chairmanship, Mrs. Anderson.
Having head the Minister, it is clear that new clause 14 is a significant improvement on clause 42, so we endorse his plan to substitute clause 42 with that new clause. It is clear that the motivation behind that is to ensure that there are appropriate safeguards for how the Pensions Regulator can make onward use of the information, which makes a lot of sense. The five reasons why the Pensions Regulator may distribute information onwards also make sense and fit with the proper discharge of its functions in the context of the Bill.
It would be useful to hear more from the Minister on the point that the hon. Member for South-West Bedfordshire mentioned about the safeguards for the practical transfer of data. This is not a question of having fun. I think that over the past two or three months, not just HMRC, but other Government organisations, have lost 33 million pieces of data, sometimes in small numbers and sometimes in large numbers. It is not just central Government, because the Scottish Government have had similar failings, so there is clearly a problem with those processes across Governments.
Will the Minister tell the Committee—it go on record in case the issue ever has to be considered again—what importance he attaches to safe and secure procedures? For example, does he envisage that the data would need to be encrypted before transfer to the Pensions Regulator? The procedure of CDs changing hands through the post with alarming frequency has been criticised several times, not least in the Government’s own review of the matter. Does the Minister set the highest store by ensuring that the procedures are as secure as possible? While the scale of potential data loss might not be as large as in previous cases, the loss of even one piece of datum is none the less one piece too many. Can the Minister give the Committee further reassurance on the practicalities behind the new clause so that it may be welcomed?

Mike O'Brien: First, it is vital to ensure that data are transferred safely and securely. That is even more the case in the light of security breaches in recent months at HMRC and elsewhere. However, let me put the sort of data we will need in context. We will need the names and contact details of employers, the numbers of employees working for those employers and the numbers of people in pension schemes. We might need the names and national insurance numbers of those employees, but that would probably not be necessary in the vast majority of cases, and perhaps only when the regulator was carrying out a more detailed investigation. Therefore, the data being transferred will contain somewhat limited details.
It is still important, however, that the procedures for data transfer covered by the Bill are carefully developed and agreed in the coming years so that we can ensure that this is done properly. Those procedures will be informed by the outcome of various reviews that the Prime Minister commissioned following the HMRC data handling issues. We want to ensure that there is good data safety in government and that the framework of the Data Protection Act 1998 works. However, it is important that the legislation is sufficiently flexible to allow operational procedures to be refined in the light of reviews and best practice that are applicable to both HMRC and the regulator.
At present, the regulator’s procedures include electronic transfer, when possible, and encryption, when disk transfer is used. HMRC’s procedures already involve measures such as the monitoring and logging of access and the protection of physical transported media. HMRC’s procedures have been newly strengthened to include using automated electronic transfer whenever possible, encryption when physical transfer is needed, and approval of any significant bulk transfers from a senior member of staff.
In addition, the Data Protection Act sets out the framework enforced by the Information Commissioner and the courts, and continues unaffected by the Bill. Therefore, there are new procedures coming into effect to deal with this issue of data transfer. Current reviews have identified changes that need to be made, and we have four years to ensure that they are put in place. Any subsequent reviews that occur during the coming years will also be able to identify and set out any further changes that might be needed. We have the time to put those in place.
I can give a lot of reassurance on transferring data because of the long lead-in time. Current procedures will be applied, and any further new procedures that enable us better to secure the transfer of data can be put into place in the run-up to 2012. With those reassurances, I hope that hon. Members will be able to approve the changes that I have suggested.

Question put and negatived.

Clause 42 disagreed to.

Clause 43

Information for private pensions policy and retirement planning

Mike O'Brien: I beg to move amendment No. 152, in clause 43, page 19, line 21, leave out from first ‘planning’ to end of line 22 and insert
‘and “the Northern Ireland Department” have the same meaning as in paragraph 2.”’.

Janet Anderson: With this it will be convenient to discuss Government amendment No. 153.

Mike O'Brien: Clause 43 allows the Pensions Regulator to share the information that it collects with the Department for Work and Pensions and its Northern Ireland equivalent. The aim of the clause is to ensure that we are able to make the changes as far as Northern Ireland is concerned.
Clause 43 mentions Northern Ireland in strict legal terms, but the gateway between the Pensions Regulator and HMRC provided in that clause does not extend at present to Northern Ireland. Clause 43 does not define the exact meaning of “Northern Ireland Department”. These technical drafting amendments are intended to clarify what the term “Northern Ireland Department” means—the Department for Social Development in Northern Ireland—and formally to extend the provision contained in clause 42 to Northern Ireland.

Amendment agreed to.

Amendment made: No. 153, in clause 43, page 19, line 22, at end add—
‘(1A) Section 323 of the Pensions Act 2004 (c. 35) (extent) is amended as follows.
(1B) In subsection (2)(c) (provisions extending to Northern Ireland)—
(a) for “paragraph 2” substitute “paragraphs 2 and 4”;
(b) for “that paragraph” substitute “those paragraphs”.
(1C) In subsection (4), for “paragraph 2” substitute “paragraphs 2 and 4”.’.—[Mr. Mike O'Brien.]

Clause 43, as amended, ordered to stand part of the Bill.

Clause 44 ordered to stand part of the Bill.

Clause 45

Objectives of the Regulator

Question proposed, That the clause stand part of the Bill.

Danny Alexander: The consideration of this clause gives us an opportunity to ask for the Minister’s reflections on a point relating to the objectives of the Pensions Regulator. Obviously, the regulator’s involvement with personal accounts has been widely welcomed, not just in this Committee and the House, but by stakeholder groups. The clause inserts a new objective for the Pensions Regulator to maximise compliance with the duties set out in chapter 1 of the Bill, which makes a great deal of sense. The Pensions Regulator has a very high reputation. It has been seen to carry out its present functions very successfully, and those whom it regulates have a great deal of confidence in it.
The only misgiving of any sort that has been expressed to me—by industry groups, for example—relates to the role of the regulator with regard to its new objective. Will the new objective in any way distract from the regulator’s existing objectives? Clearly, Liberal Democrat Members would not want that to be the case—nor, I am sure, would the Minister. The Pensions Regulator should be able to carry out its existing functions and objectives unimpeded by the new objective.
Will the Minister assure me that appropriate additional resources will be made available to the regulator to enable it to carry out the duties that it will have under the new objective in such a way that it will not have to wind down or squeeze its existing functions to make more resources available to carry out the duties described in the Bill? I hope that I know what the Minister will say, but it is important that such questions are answered on record to ensure that confidence is maintained.

Mike O'Brien: The hon. Gentleman makes extremely good points and I share his concern. We need to provide reassurance to the pensions industry that the excellent work done by the Pensions Regulator, in the role that it has adopted up to now of giving greater confidence regarding pensions, will continue unabated, and that the new work that it will take on to ensure that automatic enrolment is carried out will be properly done in addition to its current work, rather than distracting from that. It would be tragic if there were any serious distraction from that important existing role. I have had meetings with the regulator’s senior management, who are confident that they will be able to carry out their new duties and maintain the quality of work that they have done up to now in protecting and overseeing the pensions system as a whole. The objective of the new changes to which the hon. Gentleman refers is to give a number of different obligations to the regulator. Basically, the changes are designed to ensure that employers comply with their new duties. The key duties are automatically enrolling eligible qualifying jobholders into a qualifying pension scheme; informing the regulator about how they satisfy that duty; and paying pension contributions to the schemes.
The work that the regulator will do on such matters should not be unduly onerous—it will basically be collecting and managing data—but there should be intervention when there is a failure to comply with the requirements of the Bill. The Pensions Regulator will discuss such issues as resources with us in the coming months. I am not going to write any blank cheques, but I have given assurances that I do not want the Pensions Regulator to be distracted from its current role. I want to ensure that the regulator has the appropriate resources to enable it to perform its new role, without causing any difficulty in the old role.
I am grateful to the hon. Gentleman for enabling me to give such resources. I share his concerns and objectives and hope that we will be able to create the new role for the regulator in a way that means that there is just as much confidence in that new role as has been gained in the old one.

Question put and agreed to.

Clause 45 ordered to stand part of the Bill.

Clauses 46 to 48 ordered to stand part of the Bill.

Clause 49

Restrictions on agreements to limit operation of this Part

Mike O'Brien: I beg to move amendment No. 156, in clause 49, page 22, line 34, at end insert—
‘( ) The fact that an agreement is to any extent void under subsection (1) does not entitle the employer to recover any property transferred, or the value of any benefit conferred, as an inducement to enter into, or otherwise in connection with, the agreement.’.

Janet Anderson: With this it will be convenient to discuss new clause 1—Offence of offering financial inducements—
‘An offence is committed if an employer offers financial inducements to opt out of an automatic enrolment scheme.’.

Mike O'Brien: We want to deter employers from encouraging workers to opt out of pension scheme membership. Clause 49 ensures that any agreement, including those involving inducements, that aims to limit an employer’s duties or a worker’s rights under the legislation is void. Workers will remain free to opt back into qualifying pension scheme membership and to disregard any agreement to the contrary. Employers that refuse to accept workers into the scheme could receive penalties for failure to enrol. As a result of the Government amendment, they would not be able to claw back any inducements that they had given.
We believe that that approach, backed by an effective communications strategy so that both employers and workers are well informed about their rights and responsibilities, is the best way forward. We do not think that making it a criminal offence to offer inducements is the most effective way of deterring employers. In practice, the intention of the employer in such circumstances could be difficult to prove—there is some concern about the mens rea there.
I hope that the Committee will be able to accept Government amendment No. 156. I will not be able to accept new clause 1, but I hope that the changes made by the amendment will reassure hon. Members.

Andrew Selous: We certainly support the Government amendment. An employer should not be able to take back from employees any money given to them to encourage, persuade or bribe them to opt out of auto-enrolment. The measure is a sensible addition to clause 49.
I want to debate further with the Minister the question of employers offering financial inducements to their employees to opt out of auto-enrolment. It seems that as far as some employers are concerned—hopefully a small minority—there will be a clear financial incentive to pay money to employees so that they do not automatically enrol, given that the employers would save the 3 per cent. that would otherwise be added to their payroll costs year on year. They might say to an employee, “Here’s £100,”—or £500 or £1,000, who knows what the figure might be?—“this isn’t a good deal for you and there’s a lot of administration for me; it’s a silly Government scheme. Why don’t you take the money now? You’ll be better off and it will save me the hassle.” Under clause 49, such an agreement would not stand, because the employee would be able to keep the money and then chose to enrol in the scheme automatically. The TUC representative who gave us evidence was pleased about that and said that there might be some smart employees who would take the money and automatically enrol—one could not blame them.
On a serious point, my genuine worry—I am surprised that it is not shared by the Minister or, indeed, all members of the Committee—is that there will be some employees, who perhaps do not pay great attention to our proceedings or watch the news that carefully, who will take what is effectively a bribe from their employer to stay out of the scheme without realising that they have lost out on what could be an important and meaningful pension provision. Given that the Minister wants to discourage employers from doing that, I am surprised that he does not want to make it an offence for an employer to do something that is against the intention of all three parties represented on the Committee. If such action were an offence, that would be a further deterrent to employers and would, therefore, be a small but useful contribution to the Committee’s objectives.
Will the Minister elaborate on what exactly will happen, in terms of missed contributions, when such a deal between and employer and an employee is uncovered? In particular, will there be an onus on the employer to make good on the contributions that should have been paid? We have had a useful debate on the role of the Pensions Regulator. The TUC’s briefing asked whether the Pensions Regulator will look out for employers who have atypically high numbers of staff who have opted out. Will it be part of the regulator’s role to survey employers and spot unusual patterns of opt-outs that suggest that such financial inducement or bribes might be involved? Such inducements would be in the employers’ financial interest but not, in the vast majority of cases, in the interest of the employees, although that is not to say anything against the debate that we will have shortly on means-testing. New clause 1 would provide an extra deterrent to stop employers from doing something that we all agree is wrong. I will be interested to hear the Minister’s response.

Danny Alexander: I agree with much of what the hon. Gentleman said. Government amendment No. 156 makes a lot of sense in that it seeks to close a loophole that would have allowed employers to claim back any inducements that may have been offered to employees to get them to opt out of a pension scheme. It is absolutely right that an employee should not have to repay any such fee as it is the employer who would have broken the law and should therefore take the consequences.
I wish also to speak in support of new clause 1, which adds something useful to the Bill by creating this offence. It would add something to the range of powers in the Bill, and knowing that this additional matter was there would add to the sense that any employer considering such a step would have about its gravity. I do not know whether it is the hon. Gentleman’s intention to press this new clause to a vote. No doubt he will consider that having heard the Minister’s response, which I will certainly be interested to hear.
There is a further issue which Government amendment No. 156 attempts to address, and that is the issue of inducements being offered prior to someone accepting a contract of employment. That is quite a difficult area, which I tried to capture in amendment No. 98, which was quite naturally not selected for debate, but where I think there is a genuine question. This clause, for example, relates to something being written into an employee’s contract which obliges them to opt out of the personal account, on the basis of which they accept some additional financial emolument. Clearly, it is quite possible that such a transaction would be proposed by an employer before the person had accepted the job.
The prospective employee turns up for interview, has the interview, and then the employer says, “I have offered you the job, but I would like you to sign this contract”. The potential employee sees the contract and says, “Hold on. This is not right. I am not going to sign away my right to a personal account. It is an offence under the Act”. No doubt there will have been a very full publicity campaign so that potential employees will be aware of their rights. The employer then says, “Sorry, I have changed my mind, I am not going to offer you this job. I will look for somebody else”. Clearly, the employer would be in breach of the Act. Government amendment No. 156, if anything, tightens up that restriction. I am concerned about the position of someone who is not yet an employee. They may have been denied the option to take a job for which they are eminently qualified on the basis of an unwillingness to move forward in the illegal way that the employer has proposed.
I note that both the TUC and the Engineering Employers Federation are also concerned about this issue, albeit a blanket pre-employment right might be too broad, not least because it would potentially allow people to go to an employment tribunal and claim that this was the reason, even though it was not. None the less, it would be useful if, in the context of amendment No. 156 and new clause 1, the Minister would reassure the Committee on this point, and perhaps look further at whether the provisions he is trying to make with amendment No. 156 could be further strengthened to take account of the concern I have raised.

Mike O'Brien: I share the concerns of the hon. Member for South-West Bedfordshire and the hon. Member for Inverness, Nairn, Badenoch and Strathspey; Inverness and points beyond. Actually, there are no points beyond, are there? Points around. Our view is that we are better off dealing with this stage of the problem, at least, in employment contractual terms, rather than by criminalising the employer. It is, perhaps, an odd situation when a Labour Government are saying, “Let’s not criminalise the employers”, and the Conservatives are saying we should. We have looked at this with a lot of care. The way we have set about this will provide a significant degree of protection. If there is, of course, an employer who continues despite warnings and despite the intervention of the regulator, the TPR, saying to the employer you have got to start now properly enrolling people, complying with your obligations, fulfilling the purposes of this legislation, then there would be a criminal sanction if the employer continued to be in breach.
At the particular point at which inducements are offered at the start of the employment, our view is that this can be dealt with by a series of employment-related penalties that have a financial consequence for the employer but do not result in them in ending up in criminal courts. That is basically the way in which we want to deal with it.
I hear what the hon. Member for South-West Bedfordshire says. He is right to identify the issue of inducements as a very serious one. He is right, as is the hon. Member for Inverness, Nairn, Badenoch and Strathspey, to indicate that the TUC, the EEF and other organisations are concerned about this area. I think we are best dealing with it in the employment relationship but I am listening with care to what Members opposite are saying.

Andrew Selous: I just want to challenge the Minister’s logic. He said that the regulator would be able to go to the employer and say that people are not auto-enrolled but the employer can at that point say, “My employees have taken themselves out. They said they do not want to be auto-enrolled.” As for this private bung of £500,000 or whatever it was, the employer has probably said to the employee, “You keep this quiet, my lad. We do not want this getting out, do we? You have a nice extra bit in your pay packet, a couple of fivers in a brown envelope late one Friday evening.” How is anyone going to know? I understand what the Minister is saying but I think there is a slight flaw in his logic.
I do not want to criminalise any employers but from a competitive point of view, speaking as someone very pro-business, I want a level playing field. I want decent employers not to be undermined. Remember, we are talking about 3 per cent. of payroll costs, which could be quite significant. I would argue that the Minister is being slightly anti-competitive because he could be allowing this practice which he said he does not want. My point is that he is not going to know it is going on just by seeing people are not auto-enrolled. I think this would be useful.

Mike O'Brien: Again, I am listening with care to what is being said. It is the case that in our discussions with employers’ organisations they expressed some concerns that we should not move too quickly to criminalise employers. There are sanctions here. We are going to table a Government amendment in due course which will enhance the value of our measure as a deterrent by preventing employers from being able to claim back payments or benefits given to their workers as part of any agreement that is rendered void by the clause.
At the moment our view is that keeping this in the realm of employment law presents a strong enough way of preventing employers from taking this action. We anticipate that the vast majority of employers will comply with the legislation but he is right to say that there may well be small numbers who take the view that they can breach the law. That would not be a competitive approach and is one which could do quite a bit of damage to the employers who are complying properly.
I am listening with care to what he says and interested as to how hard he is pushing this particular proposal. We have taken a view up to now that we do not want to move into the criminal law in this area. He seems to be pressing quite hard that we should move into that area. I will be interested to know whether he intends to press this new clause to a Division. It might affect my view.
He did raise a couple of other issues in relation to missed contributions and whether they would be enforced. I should tell him that any contributions that are missed would be enforced. It is the case that we would have the ability to get the employer to move into a position where they make up the missed contributions if a person ought to have been automatically enrolled and would have wanted to have been part of a pension scheme—in other words, would not have opted out. In those circumstances, the TPR would be able to enforce the repayment of those missed contributions.

David Borrow: Could my hon. and learned Friend reassure me that should the problems raised by the hon. Gentleman turn out to be true once the legislation has gone through and is up and running, the Minister will be able to remedy the problems quickly without bringing forward primary legislation—to do it by regulation rather than legislation?

Mike O'Brien: We would not be able to regulate to bring in criminal sanctions like that; we would have to do that in primary legislation.
I am interested in how hard hon. Members opposite wish to press this. I do not have a closed mind on it. I am happy to give way to the hon. Member to indicate whether he, in principle, wishes to press this, which may influence my view about whether the Government should take this back and look at it again.

Andrew Selous: I think that it is a serious issue for the reasons that I have already outlined. If I heard him right, the Minister said that he was prepared to go back to the Department, sit down with his officials and perhaps look at the area again. If he is prepared to do that, we would be prepared to bear with him, perhaps until Report stage, to see what he comes forward with. It is an important point and the point made by the hon. Member for South Ribble, who is behind him now, is also important. I do not want the window of opportunity to do something to move on and we then find that it is difficult to do something about later.

Mike O'Brien: I am grateful to the hon. Member. I would also welcome the view of the Liberal Democrats.

Danny Alexander: I share the concern of the hon. Member for South-West Bedfordshire that it is a very serious issue. If the Minister is saying that he will take the issue away and look at it again, perhaps with a view to coming back at Report stage or in the other place so it can be properly considered by the Government, that would be very reasonable. There does need to be an additional power in the area. It seems wise not to press the matter, if the Minister is going to go away and look seriously at how an amendment could be framed.

Mike O'Brien: We are interested in proceeding by way of consensus on this. The Government’s view had been that we did not wish to move into the area of criminalising employers in this particular regard at this stage. There have been strong views expressed by the Opposition, both Conservatives and Liberal Democrats, on this. Indeed, among my colleagues there are some views that this is an area where we need to have a firm response by Parliament to the view that employers should not provide these sorts of inducements and that, therefore, a criminal sanction ought to be given serious consideration. Therefore, I agree to give that serious consideration to the views expressed and take this back and talk to the various stakeholder organisations, on the basis that there are obviously some strong feelings in Committee today.

Amendment agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

Danny Alexander: I simply remind the Minister that in the earlier debate I made some important points about pre-employment issues. I hope he will answer them in the coming debate.

Mike O'Brien: I am also conscious of a point made by the hon. Member for South-West Bedfordshire that I have not yet dealt with. He asked me whether the regulator, as part of his role, would be looking for unusual patterns of opt-out among employers and employees. The answer to that question is yes, he will be. It is the role of the Pensions Regulator to monitor the data in relation to the level of opt-outs among employers. It will vary from sector to sector, but we anticipate there will be an average level of automatic enrolment, and that will enable the regulator to look for unusual patterns of high opt-outs. It will then be able to intervene with those employers to find out why those high levels are present.
If it is the case that there is a non-unionised, low paid, edge-of-usual sector practice that needs investigating, we would expect the Pensions Regulator to be in a position where it could carry out a serious examination of the circumstances in that employer’s organisation—indeed, for the very competitive reasons that the hon. Gentleman identified earlier.
The hon. Member for Inverness, Nairn, Badenoch and Strathspey asked some important questions about pre-employment rights. We looked at this with a great deal of care and were pressed by the TUC to consider whether pre-employment rights should be present, because it would be theoretically easy for employers to say “We are not offering you a job yet, but we are interviewing you and one of our questions will be: are you going to sign up to the whole pensions deal? If you are, we will take a decision based on that.” So, in effect, before there is a contract of employment, or an agreement, there is a view by the employer that he will take a particular approach to an employee.
That is the problem, and it is one of the reasons why we proposed Govt amendment No. 156, which we just dealt with. It gives the employee the ability to have had an inducement, to have accepted the inducement—in the sense of accepting any “bung”, as the hon. Member for South-West Bedfordshire put it—and then, as soon as he is employed, to say “Fine, thank you for the bung, I’m going to keep that, but I now want to be automatically enrolled in the pension scheme” and there is nothing that the employer can do about that.
If we decided to create a new pre-employment right, then the concern of employers’ organisations would be that there has been pressure in the past to create all sorts of other pre-employment rights. While I did not detect a great objection to this particular one, it was to some extent a matter of principle for them, that creating a pre-employment right in this regard would then raise the question, “If you do it on this, why are you not doing it in a whole series of other circumstances?” That would be quite a significant change of principle in terms of the way we have operated employment legislation heretofore.
So I think the best approach is to put in place mechanisms to provide back-stop assistance for employees who wish to be properly enrolled, and ensure that we have some financial sanctions for dealing with employers who seek to offer inducements. The Conservatives have suggested that we go further than that, and have criminal sanctions as well, but these would relate to post-contractual rights.

Danny Alexander: I do understand what he is saying, but it does leave me feeling somewhat uneasy, because the message we are sending to potential employees who are offered a bung is to accept it and then deal with it once they are in the job. While I understand the pragmatic reality of that position, for somebody who is applying for a job to be told, “If your employer is trying to do something dodgy here, the best thing is to get into the job, trouser the cash and then get your pension rights”, there is something about that solution that leaves me feeling uneasy. I wonder whether some wording regarding whether pensions rights should be discussed at an interview stage could be brought into the Bill. It would fall short of an employment right, but would still perhaps act as a disincentive to a breach of law occurring if employers went down that route.

Mike O'Brien: I am not sure the suggestion the hon. Gentleman makes, which is that pension issues cannot be discussed in initial discussions, would fall short of a pre-employment right. We therefore need to approach this with some caution. He is right that we are adopting a course which is inelegant and is perhaps not ideal. We all know that we would rather take the course of action that he suggests in general terms, but the breach of the broad principle that there are no pre-employment rights is regarded by employers as an enormously important one—mainly because it could lead to a lot of other demands. There is a view in industrial relations circles that there is essentially a balance between employers and trade unions and employees that needs to be very carefully maintained. While this particular change might not, of itself, damage that balance, other things might then flow from it and that balance might be undermined.
It is a tricky situation and I understand why the hon. Gentleman feels uncomfortable with the position. But it is one that we have negotiated and it is, in a sense, part of what we have talked about in the past—a consensus whereby we have got the employers on board to support this. A number of compromises have been made—the TUC, for example, wanted to bring employment rights and they have accepted that this compromise, although not what they wanted, is one with which they can live.

Julie Kirkbride: While all of us have every sympathy with what the hon. Member for Inverness, Nairn, Badenoch and Strathspey is saying, it would not always be the case in terms of discussing the prospect of employment that the prospective employee would not want to discuss pensions. There will be some situations where a pension will be part of a whole package of measures making up that person’s employment. Therefore it would not be an advisable road to go down to say that there is no discussion of these things in advance of being offered a contract.

Mike O'Brien: That is an entirely fair point. Indeed, in some employment situations, the pensions package is a big part of the negotiation. At the same time and in defence of the hon. Member for Inverness, Nairn, Badenoch and Strathspey, he is suggesting not so much that the pension should not be discussed, but that an offer of employment cannot be conditional upon an employee saying that he will not take a pension, which is a slightly different point.
While I understand the hon. Gentleman’s point, and I have some sympathy with it, for the reasons I have given, we are probably best preserving the consensus with the employer on this point and accepting that it is a part of the overall agreement which has enabled broad-based support to be given to the Bill.

Amendment agreed to.

Clause 49, as amended, ordered to stand part of the Bill.
Further consideration adjourned.—[Mr. David.]

Adjourned accordingly at twenty-four minutes past Ten o’clock till this day at One o’clock.